Paytm-ICICI Bank Postpaid will function like a virtual credit card and will help ICICI Bank to assess the credit profile of customers who have no or minimal credit history

ICICI Bank has tied up with Paytm to offer short-term credit to their common customers, the first such move by any Indian bank. Photo: Hemant Mishra/Mint

Mumbai: ICICI Bank Ltd has tied up with Paytm, the largest digital payments platform in India, to offer short-term credit to their common customers, the first such move by any Indian bank.

Paytm-ICICI Bank Postpaid will function like a virtual credit card and will help the country’s largest private sector lender to assess the credit profile of customers who have no or minimal credit history.

Customers who are shopping through the Paytm platform can choose the option to pay later and use the credit line offered by ICICI Bank. The product is not available for offline customers yet and only those customers who have an account with ICICI Bank and use Paytm to shop will be eligible for the product.

The credit limit has been set at Rs20,000 and the amount borrowed needs to be repaid within 45 days. “Beyond 45 days, the amount borrowed will attract a charge of 3%, similar to our credit card offerings,” said Anup Bagchi, executive director at ICICI Bank.

The bank did not disclose information about the number of customers who will be immediately eligible for the credit product.

“Paytm-ICICI Bank Postpaid will enable more people to use Paytm more often for their daily needs. It will also lead to near 100% transaction success rate as the payment flow will remain on Paytm,” said a Paytm spokesperson.

In order to assess the creditworthiness of the borrowers, ICICI Bank will use data available about the customers with Paytm and credit bureaus apart from its own database. On assuming unsecured credit risk, Bagchi said, “Both the upside and downside will be on our books. The success will depend on quality of credit we underwrite.”

Paytm will be able to offer its customers ease of transacting. ICICI Bank will be able to use the data to build credit history of customers who have no or limited credit history.

The lender also plans to offer the credit line to non-ICICI Bank customers in the future. It will consider partnering with other e-commerce firms as well.

The product is based on a Big Data-based algorithm. “The algorithm uses an intelligent combination of financial and digital behaviour of the customer including credit bureau check, purchase patterns, frequency of purchase to ascertain the credit–worthiness of a customer within a few seconds,” the bank said in a statement.

The tie-up with Paytm comes at a time when banks are chasing retail assets as large corporate accounts go bad. Indian banks are sitting on about Rs10 trillion of stressed assets.

Paytm-ICICI Bank Postpaid will help ICICI Bank to grow its retail loan book and acquire first-time borrowers. A Boston Consulting Group report, dated 6 November, shows that between calendar years 2013 and 2017, the share of first-time borrowers in overall loans accounts opened fell from 34% to 20%.

“Many customers—who are new-to-credit and therefore, do not have a credit history—are looking for short-term credit. Two, millions of young Indians are now buying products online. We have combined these two insights to bring out a novel proposition of giving short term credit to people, completely online and instantly,” said Bagchi.